Succession Planning - are you planning to leave your business?
Some topics are rarely covered in Business 101 courses, this is one of them.
What is business succession planning?
Succession planning is determining what will happen to the business after the current owner no longer wants to own it or to work in it full-time. It is ensuring that a business can continue and that the owner can reap the benefits of all their hard work. It does not always mean total retirement – it can mean stepping back from the day-today and allowing others to take some of the work load.
Why is succession planning important?
To ensure that the business can continue to look after the customers that rely on the business and that the owners gain financially. Many small business owners have not put money into superannuation like employees and many owners see the business as their superannuation and retirement plan. Maximising the benefit can only be achieved by having a good strong succession plan in place.
How do business owners plan?
5-step method for maximising the value of a business
- Treat it like a “business”. Proper set up, and determine what makes up the business (phones, fax number, website, brand, systems).
- Complete and accurate accounting records. Cash – 3 year rule, proper accounting package, and pay a salary not personal expenses.
- De-personalise. Name of business and systems that can be worked by anyone.
- Find the right person to take over from you.
- The hereafter. What will you do after you sell the business? Have somewhere to go.
What advice can you give others?
Start early! Succession is not a short-term planning issue. It takes time to position the business for sale. Take a good look at the business and consider how it might be made more attractive to another person to buy. We spruce up a house for sale and a business is no different. Buyers will not buy what they cannot see! Cash that is undeclared and unwritten customer and supplier agreements diminish the value of a business. It takes time, effort and money to prepare the business, but it is worth it. For businesses that do not have regular customers, a database can be a selling point and never underestimate the value of a website.
What pitfalls should be avoided?
2 main pitfalls I see regularly
- Complacency – that whenever the business owner is ready to sell that there will be someone there with a fist full of cash.
- That the business is not worth anything and that no-one will buy it. Many people close down businesses because they cannot see any value in it. Even a properly planned small business operated from home has value to someone.
Meet the business
Ann Gambetta is the Principal Lawyer at South East Lawyers and can assist with your succession planning.
South East Lawyers is a boutique law firm in the eastern suburb of Croydon Victoria.
They work with individuals, families and business and focus on providing clients with sensible, practical solutions.
South East Lawyers opened in 1994 in the small-to-medium business heartland of suburban Croydon. The firm was originally known as Ann E. Gambetta & Associates.
Through the years South East Lawyers has always been a modern, service oriented legal practice that prides itself on providing advice that is practical with realistic, cost-effective solutions to legal issues.
Visit www.southeastlawyers.com.au for more information.